Myrdal's Theory of Cumulative Causation

GUNNAR MYRDAL WAS A SWEDISH economist, awarded the Noble Prize in Economics in 1974. Especially noteworthy among his many contributions are An American Dilemma: The Negro Problem and Modern Democracy, about the plight of African Americans (1944); his analysis of development issues in Economic Theory and Underdeveloped Regions (1957); and Asian Drama: An Inquiry into the Poverty of Nations (1968).

These and other works rested on Myrdal's analysis of unbalanced economic growth and resulting poverty through his concept of cumulative causation. Myrdal saw the development and underdevelopment process as an upward or downward spiral.

As opposed to the view of neoclassical economic models of development, the process of economic growth generally increased rather than decreased the gap between the rich and poor, with underdeveloped countries, regions, or social groups tending to lag even further behind their more developed counterparts. Key to his theory are backwash (unfavorable) and spread (favorable) effects, whereby in the regional context, economic growth in the more developed or metropolitan region determines economic development or the lack thereof in the less developed region.

Key backwash effects are the migration of labor and financial capital from the underdeveloped to the developed region, resulting in shortages of capital and qualified labor. Important spread effects include the diffusion of investment, innovation, and growth attitudes and institutions from the more to the less developed area and backward linkages between industries in the developed economy and input suppliers (often in raw or semiprocessed form) from the less developed region.

Myrdal felt that without appropriate actions by government, backwash effects would predominate over spread effects, thus reinforcing the backwardness and concentration of poverty in the lagging country or region. Wealthier regions enhanced their competitive position through external economies, higher-quality labor inputs, and more favorable treatment by government.

Cumulative causation also applied to disadvantaged social groups, including attitudes toward such groups. For example, in the 1940s, African Americans suffered high rates of poverty because of limited access to education, key economic inputs, and so forth. Because of their lack of education and low economic status, many white Americans viewed American blacks with disdain and sought to maintain and even enhance limited access to key resources.

Continued limited access caused blacks as a group to lag even further behind, thus reinforcing negative stereotypes held by many Americans, which in turn provided the rationale for continued discrimination. Discrimination in turn reinforced limited access, low status, and poverty. In this situation, government or “the oppressor state” played a key role in reinforcing the downward spiral of cumulative causation, with backwash predominating over spread effects.

Myrdal viewed appropriate intervention by government (the welfare state) as the key to reversing the downward spiral of cumulative causation into an upward spiral along the path of economic and social development and poverty reduction. Or, poverty pockets (for countries, regions, or social groups) could be eliminated through appropriate governmental intervention. Hence his recommendations in Asian Drama, where government-led efforts in population control, land reform, and investments in healthcare and education are advanced as a means of reversing the downward spiral and leading southeast Asia out of the mire of poverty.

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